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What’s Old Is New: Preservation Projects. Yorkshire Manor & Canterbury Village Mike Bouchee, Rocky Mountain Development Group. Joint Venture Partners. Canterbury Village. Canterbury Village 2513 Willow St, South Sioux City. Multifamily 96 Units / 4 Buildings 88 Units - Section 8
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What’s Old Is New: Preservation Projects Yorkshire Manor & Canterbury Village Mike Bouchee, Rocky Mountain Development Group
Canterbury Village2513 Willow St, South Sioux City • Multifamily • 96 Units / 4 Buildings • 88 Units - Section 8 • Constructed 1971 • Developed by Sheldon Harris • Managed by Jim Harris & Pete Godwin • Original 221(d)(3) Mortgage • 1994 refinance - subordinate 241(f) LIHPRHA loan
Yorkshire Manor2600 North Laverna St, Fremont • Multifamily • 84 Units / 4 Buildings • 84 Units - Section 8 • Constructed 1971 • Developed by Sheldon Harris • Managed by Jim Harris & Pete Godwin • Original 236 Mortgage • 1994 refinance - subordinate 241(f) LIHPRHA loan
The “Twins” • Same owner / same management company • Strong seller desire for simultaneous closings • Family legacy properties • Same subordinate 241(f) LIHPRHA financing • 2010 LIHTC Applicants • Contractor – Barry Larson & Son • Architect – Alley Poyner Macchietto Architecture • Similar substantial rehabilitation projects
Substantial Rehabiliations • New Roofs • New HVAC Systems • New Doors and Windows • Foundation Waterproofing • New Kitchens and Bathrooms • New Flooring and Paint • Site and Safety Improvements • New Community Buildings • ACM and LBP Abatement
Rent Increase & LIHPRHA • Rehab construction budgets ~ $40,000/unit • Total development budgets ~ $9MM • Necessitated rent increase of ~ 15% • HAP Contracts: OCAF or BBRI • LIHPRHA Use Agreements: OCAF or BBRI • Recent HUD guidance – new debt service includable BBRI factor in LIHPRHA projects. • Preserving LIHPRHA became project imperative
Original Financing Strategy • Assume existing subordinate 241(f) LIHPRHA loans with Midland Bank • LIHPRHA loans can only be subordinate to HUD financing • Pay off existing primary mortgages • Combine with new 221(d)(4) financing from Wells Fargo Bank • LIHTC Equity from Midwest Housing Equity Group • Omaha HUD - Production Office: • TPA, 221(d)(4), BBRI, HAP Assignment and Extension
Round One Applications January 2010 • Assumption of 241(f) subordinate loans – Midland Bank • New 221(d)(4) loans – Wells Fargo Bank • Syndicator – Midwest Housing Equity Group March 2010 • Both properties failed to pass threshold review • Back to the drawing board for Round Two
Round Two Applications March 2010 • Assumption of 241(f) subordinate loans – Midland Bank • New 221(d)(4) loans – Wells Fargo Bank • Syndicator – Raymond James Tax Credit Funds May 2010 • Canterbury Village awarded tax credits! • Yorkshire Manor not awarded tax credits • Projects are now decoupled
Key LIHPRHA Discovery May 2010 • Previously understood BBRI tied to continued existence of 241(f) loans. • Instead, BBRI is tied to existence of LIHRPHA Use Agreements; existence of 241(f) loan immaterial. • Ability to pay off 241(f) loans opened up new financing strategies.
Revised Financing Strategy • Pay off 241(f) LIHPRHA loans • Original thought - larger 221(d)(4) loans • Too slow and cumbersome • Freddie Mac Mod-Rehab Loans • PNC Multifamily Capital • Freddie Mac Waiver (~$18K/unit vs. ~$40K/unit) • LIHTC Equity • Boston Financial Investment Management • Des Moines HUD – Asset Management Office • Preservation, BBRI, HAP Assignment and Extension
Round Three Application • Yorkshire Manor only • Open to all Round 2 unsuccessful applicants July 2010 • Pay off 241(f) subordinate loans • New Mod-Rehab loans – PNC Multifamily Capital • Syndicator – Boston Financial Investment Management September 2010 • Yorkshire Manor awarded tax credits!
Decoupled Twins • Canterbury Village – May award • Alert NIFA to new Canterbury Village financing and equity partners/structure • Submit revised Yorkshire Manor application with new financing and equity partners/structure • Yorkshire Manor – September award • Extend site control (both) • Financing and equity due diligence (both) • LIHTC reservation extension (both)
The Closing Table • Finalize due diligence and underwriting • Negotiate reserves and guarantees • Negotiate partnership and closing documents • Ready to close both properties in early December • Fannie Mae decides properties are now de-stabilized! • Both transactions close simultaneously: December 29, 2010
Rehab is Underway • Notices to Proceed – December 29 • 12-month construction schedules • Projects will be complete and placed in service in 2011
Preservation “Best Practices” • Minimize Subsidy/Unit • Work with LIHTC-experienced partners • Develop sufficient and consistent specifications • Give due diligence highest level of scrutiny • Fully understand QAP; ensure partners do as well